— Ireland has loudly proclaimed its unity with rest of the EU since Britain voted to leave the bloc, but a clash over the Irish low-tax regime could shatter the cohesion, writes Naomi O’Leary. In Irish business circles, Brexit has triggered a brainstorm on how best to use the U.K.’s decision to push back on the EU’s crackdown on Irish tax policy. Their nuclear option: “Irexit.”

— The European Union’s most senior judge has proposed using the European Free Trade Association’s court as a compromise after Brexit, in an interview with the Times. The court oversees single market issues for non-EU members Iceland, Liechtenstein, Norway and Switzerland within the framework of EU rulings and European law. ICYMI, here’s POLITICO’s cheat sheet so you can tell your EFTA from your EU.

— Financial firms’ contingency plans show that Brexit poses a “material risk” to regulator’s objectives as it could disrupt services and force firms to restructure in a way that makes them harder to supervise, according to a letter published today by the U.K. Prudential Regulation Authority’s CEO Sam Woods. The letter is the PRA’s response to Treasury select committee chair Nicky Morgan’s July 24 inquiry on Brexit disruption. The analysis will be passed onto the prudential regulation committee and the Bank of England’s financial policy committee. See Insight, below.

INSIGHT

It seems that with Brexit, the more data you collect, the scarier it looks.

After amassing information on contingency plans from more than 400 firms, a top U.K. financial regulator issued the strongest warning so far about how Brexit will destabilize the financial sector, introduce new risks and over-burden the regulators meant to manage them.

The warning came in a letter from Sam Woods, the Prudential Regulation Authority’s CEO, who gave his thoughts after looking at financial services firms’ post-Brexit plans and concluding that the economic impact of leaving the EU will “pose a material risk” to regulators’ objectives.

Beyond echoing broader warnings about disruption, Woods identified more specific risks. For example, firms are worried about being able to continue to use existing contracts, many of which will need to be revised because they reference the EU. He also highlighted data transfer, which could be limited if the EU decides new U.K. rules aren’t up to standard.

But perhaps the most important problems relate to how firms will restructure themselves because of Brexit and what that means for their oversight.

The EU has made it clear that firms relocating to the EU need to have full functionality, which means, for example, not allowing risk management to be delegated back to a headquarters in the U.K. To meet that requirement, banks will need to move (or replicate) a chunk of their back-office functions to somewhere in the EU.

“If you try to break those functions in two bits, that is going to be really hard,” said Simon Gleeson, a partner at law firm Clifford Chance. “The [Bank of England] has doubts about the ability to execute that efficiently and effectively in the time available.”

It also makes oversight of banks more difficult for regulators. Woods said in his letter that these restructured firms will be more complex, and that regulators need to make sure the new double-entities “do not impede supervisability or resolvability.”

Banks with two separate European hubs will be subject to two separate resolution authorities, who, if they don’t trust each other, will insist that each entity holds a separate pot of capital to back up their liabilities — a huge backwards step.

Overall, what the letter makes clear is that the impact of Brexit will impose a major burden on regulators trying to contain risk.

“This whole thing has got an air of disaster about it,” said Graham Bishop, a financial services consultant in London, adding that because of the letter his outlook “may have to change from darkening ‘steadily’ to ‘rapidly.’”

— Brexiteers appear to have relaxed about the future of one of British politics’ most iconic buildings. Calls in February for 32 Smith Square — once former Prime Minister Margaret Thatcher’s headquarters and later sold to the EU, which renamed it “Europe House” — have died down, and officials on both sides of the negotiations now expect the building to remain the last EU stronghold in London after Brexit.

— Scottish ministers will call for increased powers during talks in Edinburgh today, after again threatening to ax the U.K. government’s Repeal Bill, local media reported. First Secretary of State Damian Green and Secretary of State for Scotland David Mundell are set to meet with Scottish Deputy First Minister John Swinney and Scotland’s Brexit minister, Michael Russell, to discuss what powers Holyrood will gain after Brexit.

— Chancellor Philip Hammond’s approval rating among Conservative Party members has sunk after he set out his vision for a softer Brexit and advocated a lengthy transitional deal with the European Union. A Conservative Home survey of the party’s rank and file found that Hammond had a net satisfaction rating of -25.4, down from +32.4 before the general election.

— “We need to talk about immigration — as a nation, as a society and as policymakers,” writes Scottish Conservative leader Ruth Davidson in the Telegraph. “Neither of the major parties of government has sought to have a meaningful and sustained discussion with the public about the merits and drawbacks of immigration … we Conservatives must start — and sustain — that conversation.”

— There needs to be “an outbreak of common sense” in London, and it would be “absolutely reprehensible” if British lawmakers couldn’t get their act together and put the future of the island of Ireland at risk, former Irish European Minister Dick Roche told the BBC today. Roche joins Irish PM Leo Varadkar in making tough, pro-soft Brexit comments, which senior government figures claim is part of an attempt to influence opinion in Britain, the Irish Times reported.

— Regulators must remain “very very” vigilant about the risks to the economy, former Chancellor Alistair Darling told BBC Radio 4, 10 years on from the start of the financial crisis. He said that while the British financial system was safer now and the economy had grown since the crisis, he was concerned it was now starting to slow down and that Brexit was causing “massive uncertainty,” which together with rising consumer debt, should “raise alarm bells.”

— Michael Rawlins was appointed to a second three-year term as chair of the U.K.’s Medicines and Healthcare Products Regulatory Agency, it announced Tuesday. It’s a sign of continuity at the British regulator through the Brexit upheaval.

— The U.K. is “a bit gloomy” about Brexit, Australian High Commissioner Alexander Downer told the BBC’s Today program. He added: “You are going to succeed based on what policies you pursue subsequently,” and it’s important that both the EU and the U.K. work to maintain free trade.